So you've decided to become an independent developer. In my case that's a fancy way of saying "I'm going to make a video game." Also in my case there's the subtext "and not get a paying job this summer." So you're faced with the reality that if you want to develop games as anything more than a hobby, you're going to have to find a way to make money off of your game. There are a number of ways to monetize, but for now I'm going to focus on the old fashioned way, convincing people to buy it.
There are a ton of decisions that go into making a game, but this post is about economics so I'm going to focus on how economics has influenced my decisions. I knew from the beginning that I wanted to make a game that would be more complex than what the casual gamer would be looking for. This narrows my particular market to one of the 2.5 included in the post below that are non-casual. I've always wanted to make an RPG so I decided that that would be the type of game I'd make. In my opinion this limits my market to really just the last two discussed in the below post. As an indie developer I already would have had a hard time reaching the Big Name gamer, RPGs are a genre that I think are doubly hard to reach the Big Name gamer with so I decided to just forgo that market.
Now I'm left deciding between the core gamer market and the iOS gamer market. In pure numbers, I feel that the core gamer market is larger than the iOS gamer market. I also feel that there is a lot more competition in the core gamer market. This was a decision that took me a little while so I'm going to go deeper into my thought process.
In a competitive marketplace, manufacturers are successful by differentiating their product. This differentiation provides a sort of monopoly power in the marketplace. Think if you were the only company making chocolate ice cream. The market for ice cream may be competitive, but if someone wants chocolate, you're the only game in town. So how can you differentiate a game in the App Store? One way is by having brand cachet, but as a new developer you're not going to have that. A second way is genre differentiation. Tower defense games have been really popular on the App Store and have gained fans of the genre. Therefore just by making a TD game, you're appealing to a group of fans.
Another is innovation. Innovation in games can be a double-edged sword. You might have something new, but if it's not accessible, or interesting, or fun it doesn't matter. For this reason it's hard to set out to innovate. Innovation is also something that I think many developers would like to believe they have in spades. I'd certainly like to believe that about myself, but I also want to be realistic. There are certainly things I consider innovative in The Epic of Roderick, but I don't want to kid myself into thinking that they will be heralded as the next revolution in gaming. I hope they will be, but I'm not banking on that.
There are other ways to differentiate, but the one I came back to, I'm sure because of my background in retail, was customer service. Was there a way that I could make a game that provided better customer service? In a way this is a model that many developers have gone with their games. Updates and additional (free) content could certainly be considered customer service, and it seems that apps that are focused on this are able to differentiate themselves and become more successful. While we will certainly have updates and additional content (provided we get enough downloads to support it), I wanted to try and take customer service differentiation one step further.
When I asked myself what that step would look like, I had to go back to considering my potential customers, core gamers and iOS gamers. Was there a customer need or want that was not being met enough on the App Store. When looked for what core gamers would be most want in an RPG on their iPhone, it seemed the biggest thing they were missing on the App Store was a really deep, engrossing and rich RPG experience. While I would love to some day design a 100 hour epic, I felt that would be a bit much for my first foray into game development. When I looked for what iOS gamers wanted out of an RPG, it was much clearer. The game had to be native. That was something I thought I could deliver on (and I'll talk about much more as we get closer to release time).
So now I had my market, the iOS gamer. Yes in my opinion it's the smallest gaming market on iDevices, but I feel it's the market with the least amount of competition and the most potential for growth.* I cannot stress the importance of deciding on my market enough. I had decided to differentiate my product through providing excellent customer service. I had to know my customers. My goal was now to not only make a great game, but also make a product specifically tailored to the wants and needs of the iOS gamer. Awesome!
So what does any of this have to do with the economics of the App Store? Well a market consists of producers and consumers. These two groups are linked by products and prices. I wanted to write down some thoughts as a producer on how these have come together in this instance.** Consider it micro-microeconomics. I also wanted to show how economics can play into design decisions. I'm still keeping my specific design decisions close to the chest, but all of my design decisions were made with my potential customers in mind. I was always asking how The Epic of Roderick could be more appealing to iOS gamers. That was based on a desire to differentiate my product through customer service, a desire I had because I want my product to be viable in a competitive market place that does not have price as a signal and has poorly developed stratification amongst consumers.
Next post I'm going to talk more about monetization and how it plays out on the App Store, and how I see it playing out in the long run. I'll also talk more about where I see the future of iOS gaming taking us with a focus on economics. Remember to follow us on twitter @InstantLazer and let me know that you're reading.
Wednesday, August 10, 2011
Wednesday, August 3, 2011
The Economics of The App Store part 2
In the first post of this series, I spoke a little of how price is not a signal on the App Store. In this post I want to talk a little bit about what effect this has on consumers of apps. In my opinion there are 3.5 kinds of consumers of games on the App Store, the casual/non-gamer, the "Big Name" gamer, the core gamer, and the 0.5 is for a new brand of gamer I'll dub the iOS gamer. I'm going to talk about these three and a half types later, but first I want to talk about price signaling and consumers in general.
Let's take a completely separate industry that many people have experience with as an example, the market for gasoline. If you're like most consumers of gas, you know that there are different octane levels, but you don't have a clue what that means. You pick the octane level you're comfortable with, let's say Regular, and every time you get gas, you get Regular. Now let's say you're driving along and you come to a corner with two gas stations. What difference in price would there need to be for you to turn left instead of right? Two cents, I'm still turning right. Five cents and now I'm thinking about turning left. Why? Because price is not indicating anything of meaning to me as a consumer. A five cent increase in price doesn't indicate anything because gas is gas right? I'm picking whatever's cheapest.
Now let's say that one of those stations is selling Regular for two dollars more than the other station. Now maybe there's something going on. So you go and ask the attendant why the gas costs two dollars more. They let you know that it improves the performance of your differential flange, PVC, and EGR valves. If you're a mechanic, or otherwise knowledgable about cars, then you might know whether or not that is worth two dollars. If you're not knowledgable, however, the attendant might as well have said that it reenergizes your flux capacitor. You have no idea whether that's worth two dollars or not so why would you pay 50% more for a gallon? This is a key point in markets where price is not a signal, a difference from the standard price level needs to be qualified with information, but for a product to be successful that information needs to be meaningful to consumers. That's how you introduce price signaling into a market that is lacking it.
Now keep in mind the need for meaningful information as we discuss the different consumers of the App Store. First up is the casual/non-gamer. This is the consumer that didn't really play games until very recently, and doesn't really play games now, they have some games to waste some time with but won't go out of their way to get anything else.
Let's say that you're not a wine drinker, but you go to a friend's party and they have a merlot that you really like. You ask them what it is and the next time you go to the store you pick up a bottle. Now, you've enjoyed one wine so you decide to see if there are other wines that you like. You don't know all that much about wine, but you figure there's got to be some other good ones out there. So you head to the store and pick up (over multiple trips usually) a white wine, a different kind of red wine, and a more expensive merlot because those are the three different options from your perspective. Now, if none of them are as good as your merlot what are the chances that you will buy a different wine again? You have found the brand you like, you've tried others and they're not as good, so you buy that wine whenever you need a bottle and that's that.
This is our casual/non-gamer's experience. They got Angry Birds because a friend let them try it and they liked it. They may have tried a couple of other games, but they weren't as fun as Angry Birds so they stopped buying different games and just kept Angry Birds. Now back to our wine drinker. Your friend is having another party and now they have a new wine that you try and like. Now you have a second brand that you purchase and since you've been drinking the same thing for a year, you switch to the new wine. Now as a wine consumer this is how you make your purchasing decisions, you wait for your friend to let you try a new brand and then if you like it you buy it. This is how the casual/non-gamer looks at game purchasing. They get recommendations from friends (or the New and Noteworthy) and will never go combing through genres and sub-genres looking for something in particular.
The second kind of gamer is what I call the "Big Name" gamer. This is the gamer that has a console, and views games as something to do beyond just killing some time. They tend to consume well-known games, and games in particular series that they know they like. They play plenty of games, but it will take a little bit to get them to take the plunge on a game from a small or unknown developer. For these gamers, purchasing a game from the App Store is like looking for a sock in a pile of laundry. You rummage around for a bit and if you find the sock then awesome! If you don't find it after a little while you stop looking, grab the closest sock you find, and worry about matching socks another day. Of course once the laundry is separated and put away, finding the sock is no problem.
How does this analogy translate? Well let's say the Big Name gamer feels like purchasing a game. They've been playing a lot of Call of Duty so they search for call of duty in the App Store, find they can shoot zombies and boom CoD: Zombies is being downloaded. This is the laundry separated. Next they've been playing Dragon Age and are wondering if there's something RPGesque with some nice graphics to do some battling. They do a google search for iPhone games with nice graphics and swords. They've heard of Gears of War so Epic sounds legit and boom, Infinity Blade is downloaded. This is rummaging for the sock and finding it. Finally, they've been playing a bunch of LittleBigPlanet so they go searching for a platformer, a google search shows that there's eleventh-billion platformers for iOS. This gamer clicks a few links, decides it's not worth it, downloads whatever platformer's on the front page, and whatever's in New and Noteworthy gets downloaded. The point is, this gamer isn't going to go out of his/her way to find a game to play. If they don't find it, they either download something from the front page or nothing at all because their iDevice is not one of their primary gaming devices.
The third type is the core gamer. This is the consumer that follows the gaming industry and knows what's out there. The thing is, they don't have an iDevice for gaming. That's what their consoles and PSP/DS is for. This gamer is informed and will purchase games for their iDevice should they fit their particular gaming tastes. They are like the mechanic purchasing the expensive gas. You can give them esoteric information about games and let them make an informed gamer opinion on purchasing. But the key is that when they are looking to spend their gaming dollars, they look first to their other gaming systems. Like the Big Name gamer, iOS is secondary to their more dedicated gaming devices.
Finally there is a new breed of gamer that is developing, and that is the iOS gamer. This gamer is informed like the core gamer, but one of their primary systems is their iDevice. This is the group that downloaded Sword and Sworcery on day one. They know their ranking on GameCenter and have AppShopper installed on their phone with notifications on. Their home page is TouchArcade. This is a slowly growing group of gamers, and is absolutely essential to the future success of gaming on iDevices. They are the friend that keeps throwing parties with wines you like.
Now the reason I presented these 3.5 types of iDevice game consumers in this order is because I think that's the order that they are represented in terms of number of consumers. By far and away the largest number of iDevice owners are casual/non-gamers, followed by Big Name gamers, followed by core gamers, and finally by iOS gamers.* This has lead to a ridiculous information gap where games are being developed and marketed towards the last two demographics with expectations of selling them to the first two demographics. If a casual gamer (i.e. the majority of iDevice users) asks you why your $3 game is worth two dollars more than Angry Birds, and you answer, "because it's an isometric hack 'n slash with randomized dungeons." you've definitely lost a potential customer.
BUT, and here's the key, if you've made an isometric hack 'n slash, your potential customers are not casual gamers. This is where I think the hope is for the future of gaming on the App Store, and also why I don't think that there's a race to the bottom going on. For the very limited history of the App Store, most developers have viewed it as one giant gaming market of iDevice users. In actuality there are two markets. One is the market of all iDevice users, the other is the market of core gamers that have iDevices. Plenty of developers have tried to bridge these two markets, whether intentionally or unintentionally, and few have met with success. Without price as a signal, there simply is no way to provide enough information to the casual/non-gamer to differentiate a game to warrant an increase in price. But for the consumers that are informed, core gamers and iOS gamers, you can charge more than a dollar because they will understand what the increase in price is for.
The casual/non-gamer market has established its price standard as $1. This is hardly surprising since the casual/non-gamer would simply not purchase anything if games were more expensive. What we don't have yet is the price standard for the second market of core gamers. One simple reason is that we have no good idea how large that market is. If it's 10% of iDevice users than a reasonable price standard may be $10, but who knows what that percentage actually is.** For a business, few things could be riskier than producing a product for a nebulous market of unknown size. Few developers seem to even think that there is a secondary market of core gamers, but even if they did the markets for core gamers are almost certainly larger on dedicated handhelds and is certainly larger for consoles. If you have the capital to develop a game for core gamers, why would you choose the platform with the smallest market?
This has been a long post, but if you take only one thing away from it regarding the economics of the App Store let it be this. We do not have a market with a race to the bottom occurring with games on the App Store. Instead we have a much larger casual gaming market obscuring a smaller core gaming market. A race to the bottom would imply that developers could make Angry Birds-like profit off of increasingly inferior products. If anything, the opposite is true. The amount of value demanded by the casual gamer for $1 increases. This is exactly as it should be in a competitive market. But the value added needs to be understandable by a casual gamer.*** If you have a 100 hour-long srpg with a deep skill tree and extensive leveling system with customizable everything, you can price it at a dollar, but it isn't going to resonate with the casual gamer. Every core gamer that likes long srpg's will recognize the value for a dollar and will purchase it, but those gamers would probably buy it at $3, or $7, or maybe even $16. As a developer you gain nothing by pricing a game like that at $1, and the only reason you would is by not understanding the difference between the casual gamer and core gamer markets.
This post is already way too long so I'm going to wrap it up. Next post I'm going to talk about some specific decisions I've made while designing The Epic of Roderick with concerns to the economics of the App Store. I'll also talk a little bit about the economics of some of the unique economic aspects of the App Store such as IAP, freemium, free-with-adds, etc. And I'll also talk more about where I see the future of game development on iOS going with an eye towards economics. Remember to follow InstantLazer on Twitter @InstantLazer, and let me know if you're reading.
*I have no numerical evidence to back up this claim as I don't believe any data exists. This is purely my impression through being involved in the iDevice community and looking at people I know with iDevices.
**Price levels have a huge number of factors that aren't done justice by this simplistic "one-tenth the size means ten times the price" statement. It is offered only as a very quick reference point for the discussion.
***Just as an aside, I see a number of developers on sites complaining about the fickleness of iDevice consumers when their game doesn't sell a gajillion copies. If you're selling a casual game that is not as much fun and as polished as Angry Birds, or Fruit Ninja, or Doodle Jump, or Cut the Rope, and you priced it at $2, you should be celebrating selling even one copy. If you priced it at $1 then you've brought an inferior product to a competitive market. How many carrots would you sell at market price if they were cut in half? If you're selling a complex and/or deep game, then your market is much smaller than the totality of iDevice owners and you need to change your expectations of success.
Let's take a completely separate industry that many people have experience with as an example, the market for gasoline. If you're like most consumers of gas, you know that there are different octane levels, but you don't have a clue what that means. You pick the octane level you're comfortable with, let's say Regular, and every time you get gas, you get Regular. Now let's say you're driving along and you come to a corner with two gas stations. What difference in price would there need to be for you to turn left instead of right? Two cents, I'm still turning right. Five cents and now I'm thinking about turning left. Why? Because price is not indicating anything of meaning to me as a consumer. A five cent increase in price doesn't indicate anything because gas is gas right? I'm picking whatever's cheapest.
Now let's say that one of those stations is selling Regular for two dollars more than the other station. Now maybe there's something going on. So you go and ask the attendant why the gas costs two dollars more. They let you know that it improves the performance of your differential flange, PVC, and EGR valves. If you're a mechanic, or otherwise knowledgable about cars, then you might know whether or not that is worth two dollars. If you're not knowledgable, however, the attendant might as well have said that it reenergizes your flux capacitor. You have no idea whether that's worth two dollars or not so why would you pay 50% more for a gallon? This is a key point in markets where price is not a signal, a difference from the standard price level needs to be qualified with information, but for a product to be successful that information needs to be meaningful to consumers. That's how you introduce price signaling into a market that is lacking it.
Now keep in mind the need for meaningful information as we discuss the different consumers of the App Store. First up is the casual/non-gamer. This is the consumer that didn't really play games until very recently, and doesn't really play games now, they have some games to waste some time with but won't go out of their way to get anything else.
Let's say that you're not a wine drinker, but you go to a friend's party and they have a merlot that you really like. You ask them what it is and the next time you go to the store you pick up a bottle. Now, you've enjoyed one wine so you decide to see if there are other wines that you like. You don't know all that much about wine, but you figure there's got to be some other good ones out there. So you head to the store and pick up (over multiple trips usually) a white wine, a different kind of red wine, and a more expensive merlot because those are the three different options from your perspective. Now, if none of them are as good as your merlot what are the chances that you will buy a different wine again? You have found the brand you like, you've tried others and they're not as good, so you buy that wine whenever you need a bottle and that's that.
This is our casual/non-gamer's experience. They got Angry Birds because a friend let them try it and they liked it. They may have tried a couple of other games, but they weren't as fun as Angry Birds so they stopped buying different games and just kept Angry Birds. Now back to our wine drinker. Your friend is having another party and now they have a new wine that you try and like. Now you have a second brand that you purchase and since you've been drinking the same thing for a year, you switch to the new wine. Now as a wine consumer this is how you make your purchasing decisions, you wait for your friend to let you try a new brand and then if you like it you buy it. This is how the casual/non-gamer looks at game purchasing. They get recommendations from friends (or the New and Noteworthy) and will never go combing through genres and sub-genres looking for something in particular.
The second kind of gamer is what I call the "Big Name" gamer. This is the gamer that has a console, and views games as something to do beyond just killing some time. They tend to consume well-known games, and games in particular series that they know they like. They play plenty of games, but it will take a little bit to get them to take the plunge on a game from a small or unknown developer. For these gamers, purchasing a game from the App Store is like looking for a sock in a pile of laundry. You rummage around for a bit and if you find the sock then awesome! If you don't find it after a little while you stop looking, grab the closest sock you find, and worry about matching socks another day. Of course once the laundry is separated and put away, finding the sock is no problem.
How does this analogy translate? Well let's say the Big Name gamer feels like purchasing a game. They've been playing a lot of Call of Duty so they search for call of duty in the App Store, find they can shoot zombies and boom CoD: Zombies is being downloaded. This is the laundry separated. Next they've been playing Dragon Age and are wondering if there's something RPGesque with some nice graphics to do some battling. They do a google search for iPhone games with nice graphics and swords. They've heard of Gears of War so Epic sounds legit and boom, Infinity Blade is downloaded. This is rummaging for the sock and finding it. Finally, they've been playing a bunch of LittleBigPlanet so they go searching for a platformer, a google search shows that there's eleventh-billion platformers for iOS. This gamer clicks a few links, decides it's not worth it, downloads whatever platformer's on the front page, and whatever's in New and Noteworthy gets downloaded. The point is, this gamer isn't going to go out of his/her way to find a game to play. If they don't find it, they either download something from the front page or nothing at all because their iDevice is not one of their primary gaming devices.
The third type is the core gamer. This is the consumer that follows the gaming industry and knows what's out there. The thing is, they don't have an iDevice for gaming. That's what their consoles and PSP/DS is for. This gamer is informed and will purchase games for their iDevice should they fit their particular gaming tastes. They are like the mechanic purchasing the expensive gas. You can give them esoteric information about games and let them make an informed gamer opinion on purchasing. But the key is that when they are looking to spend their gaming dollars, they look first to their other gaming systems. Like the Big Name gamer, iOS is secondary to their more dedicated gaming devices.
Finally there is a new breed of gamer that is developing, and that is the iOS gamer. This gamer is informed like the core gamer, but one of their primary systems is their iDevice. This is the group that downloaded Sword and Sworcery on day one. They know their ranking on GameCenter and have AppShopper installed on their phone with notifications on. Their home page is TouchArcade. This is a slowly growing group of gamers, and is absolutely essential to the future success of gaming on iDevices. They are the friend that keeps throwing parties with wines you like.
Now the reason I presented these 3.5 types of iDevice game consumers in this order is because I think that's the order that they are represented in terms of number of consumers. By far and away the largest number of iDevice owners are casual/non-gamers, followed by Big Name gamers, followed by core gamers, and finally by iOS gamers.* This has lead to a ridiculous information gap where games are being developed and marketed towards the last two demographics with expectations of selling them to the first two demographics. If a casual gamer (i.e. the majority of iDevice users) asks you why your $3 game is worth two dollars more than Angry Birds, and you answer, "because it's an isometric hack 'n slash with randomized dungeons." you've definitely lost a potential customer.
BUT, and here's the key, if you've made an isometric hack 'n slash, your potential customers are not casual gamers. This is where I think the hope is for the future of gaming on the App Store, and also why I don't think that there's a race to the bottom going on. For the very limited history of the App Store, most developers have viewed it as one giant gaming market of iDevice users. In actuality there are two markets. One is the market of all iDevice users, the other is the market of core gamers that have iDevices. Plenty of developers have tried to bridge these two markets, whether intentionally or unintentionally, and few have met with success. Without price as a signal, there simply is no way to provide enough information to the casual/non-gamer to differentiate a game to warrant an increase in price. But for the consumers that are informed, core gamers and iOS gamers, you can charge more than a dollar because they will understand what the increase in price is for.
The casual/non-gamer market has established its price standard as $1. This is hardly surprising since the casual/non-gamer would simply not purchase anything if games were more expensive. What we don't have yet is the price standard for the second market of core gamers. One simple reason is that we have no good idea how large that market is. If it's 10% of iDevice users than a reasonable price standard may be $10, but who knows what that percentage actually is.** For a business, few things could be riskier than producing a product for a nebulous market of unknown size. Few developers seem to even think that there is a secondary market of core gamers, but even if they did the markets for core gamers are almost certainly larger on dedicated handhelds and is certainly larger for consoles. If you have the capital to develop a game for core gamers, why would you choose the platform with the smallest market?
This has been a long post, but if you take only one thing away from it regarding the economics of the App Store let it be this. We do not have a market with a race to the bottom occurring with games on the App Store. Instead we have a much larger casual gaming market obscuring a smaller core gaming market. A race to the bottom would imply that developers could make Angry Birds-like profit off of increasingly inferior products. If anything, the opposite is true. The amount of value demanded by the casual gamer for $1 increases. This is exactly as it should be in a competitive market. But the value added needs to be understandable by a casual gamer.*** If you have a 100 hour-long srpg with a deep skill tree and extensive leveling system with customizable everything, you can price it at a dollar, but it isn't going to resonate with the casual gamer. Every core gamer that likes long srpg's will recognize the value for a dollar and will purchase it, but those gamers would probably buy it at $3, or $7, or maybe even $16. As a developer you gain nothing by pricing a game like that at $1, and the only reason you would is by not understanding the difference between the casual gamer and core gamer markets.
This post is already way too long so I'm going to wrap it up. Next post I'm going to talk about some specific decisions I've made while designing The Epic of Roderick with concerns to the economics of the App Store. I'll also talk a little bit about the economics of some of the unique economic aspects of the App Store such as IAP, freemium, free-with-adds, etc. And I'll also talk more about where I see the future of game development on iOS going with an eye towards economics. Remember to follow InstantLazer on Twitter @InstantLazer, and let me know if you're reading.
*I have no numerical evidence to back up this claim as I don't believe any data exists. This is purely my impression through being involved in the iDevice community and looking at people I know with iDevices.
**Price levels have a huge number of factors that aren't done justice by this simplistic "one-tenth the size means ten times the price" statement. It is offered only as a very quick reference point for the discussion.
***Just as an aside, I see a number of developers on sites complaining about the fickleness of iDevice consumers when their game doesn't sell a gajillion copies. If you're selling a casual game that is not as much fun and as polished as Angry Birds, or Fruit Ninja, or Doodle Jump, or Cut the Rope, and you priced it at $2, you should be celebrating selling even one copy. If you priced it at $1 then you've brought an inferior product to a competitive market. How many carrots would you sell at market price if they were cut in half? If you're selling a complex and/or deep game, then your market is much smaller than the totality of iDevice owners and you need to change your expectations of success.
Saturday, July 30, 2011
The Economics of the App Store part 1
So, not a lot of people have been checking out this blog and I've been wanting to write on the economics of the App store for quite some time so I'm writing this with the expectation that nobody will read it so I won't quote a bunch of sources and all that jazz. There're a lot of misconceptions of how the economics of the App store works and I'd like to spend a bunch of lines diving deep into what makes the App store unique and different as a marketplace so that at least I can feel like I "get" it. I'm going to lay out a lot of economic principles below and in subsequent posts so bear with me. To give you an idea of what's to come, it is often said that there is a "race to the bottom" going on in the App store. I don't believe this is the case and I'll lay out why, along with a whole slew of other things, below.
If you were to round up a bunch of economists and ask them what the most important principle in economics is, they would unanimously shout the law of supply and demand. The law of supply and demand simply put is that when supply goes up, price goes down, and when demand goes up, price goes up. In an ideal market, the price of a good is placed where these two lines meet and everything is great. The App store (digital distribution in general) is the first thing I can think of that necessitates an update to the supply and demand model. Why? Because digital distribution effectively gives us infinite supply. Once a product is on the market it costs $0 to maintain that product on the market.* Think of it this way, if someone out there had discovered a way to grow just one carrot and then could infinitely duplicate that carrot for free, how much would you be willing to spend on carrots?
If we forget about demand for a second and ask ourselves what goes into the price of a good, there are many factors. One of those factors is scarcity. Lobsters cost more in Kansas than in Maine because there's just not that many lobsters in Kansas. With infinite supply there is no scarcity in the App store. Another is production cost, as there is no production cost for an individual download of an app, this also is not a consideration in price.* There is the initial cost of development to consider, but if/when that is recouped you're again left with no real supply-side rationale for price.
Now let's look at demand. There are a ton of free apps on the App store. The demand for anything that's free should be infinite.** So we have a lot of apps that have infinite supply and infinite demand, why would anyone ever bother with actually paying for an app. Well in most markets that have huge supply and huge demand, price can often act as a signal for quality (quality is of course subjective as the following example will show). Think of bottled water. In many parts of the US, you have three options for water. You can schlep down to the local waterway with your cup, you can pour a glass from your tap for a nominal fee, or you can spend $1.50 on 16oz. of bottled water. Between the first two options, you'd be hard up to find anyone drinking from the lake, but between the last two you have a more interesting choice. Many people who choose bottled water over tap water do so because of a perception that the bottled water is of higher quality than the tap (another major factor would be a perception of convenience with bottled water). Is the water of higher quality? Well maybe it is and maybe it isn't, most consumers aren't going to break out the lab kit in order to test it. They instead rely on the price to signal that it is of higher quality. Markets have worked like this ever since there have been markets, with price signaling something about a product.
But does price signal anything of note in the App store? At first blush it may seem to indicate quality, but I would argue that quality games with higher prices are able to charge more because of brand recognition rather than price signaling. Cave can charge $12 for Deathsmiles because they're Cave, not because $12 is a particularly meaningful price indicating quality. If you download the next game that is released at $0.99, it's pretty likely it won't be as good as a number of free games available. Now as a consumer, once price loses its ability to signal quality, what are you left with? Well you have brand recognition, and you have word of mouth. In part two I'm going to talk a little bit about word of mouth as I focus more on the consumer. For now let's look at brand recognition in the App store as we continue to focus on supply.
Squeenix is about as powerful a brand name as you can get in gaming. They can and do ask for premium prices on many of their games. Now Squeenix makes quality games as well so you're not really taking a chance when you purchase something from them. You know what kind of game you're going to get and if you're a fan it's usually going to be worth the price. So let's compare some prices: Crystal Defenders: $8 & Field Runners: $3; Final Fantasy: $9 & Ash $5. I bring these examples up because they're two games in the same genres of, in my opinion, similar quality, and the non-Squeenix games are from lesser known developers. Is the price difference here indicating quality, or is it a premium paid for brand recognition? I would argue that it is a premium. If it is a premium then what do the price points of Field Runners and Ash indicate versus 99 cent offerings in their respective genres? The answer is nothing. To the average consumer on the App store, price does not convey any meaningful information, and since this is the case the average consumer is far less likely to "risk" spending a premium amount on a game that ostensibly has cheaper alternatives. In the case of FR and Ash, both games were good enough to have some consumers eventually understand the value of their price, but the price itself did not indicate that value.
So as an unknown developer you really only have three options when it comes to pricing. You make a middling quality*** game and sell it for 99 cents and hope that it competes with the slew of other Apps of middling quality that sell for 99 cents. This is viable especially if your game has a distinguishing hook. You make a high quality game and sell it for 99 cents with the hope that its high quality will increase your brand recognition so that subsequent games can be released for a higher price. This is viable and arguably the best strategy if you plan on long term success for a new development studio, this is also why a lot of games go on sale when a new game comes out from a company. The third option is to make a high quality game and sell it at a premium price, and hope that word of mouth regarding its quality can carry it. This is somewhat viable, but definitely the riskiest choice of all. It also requires that there is a large enough audience for your game that you'll be able to reach without getting lost in the clutter of the App store. I'll talk about that more in the next part as well.
If we assume an even split between these three options we have a reason for why there are such a deluge of 99 cent games, and such a disparity in quality. In actuality, I would guess that the first option is far and away the most popular, and this undermines price as a signal even further by flooding the market with middling quality games that cost a buck. The funny thing is that what prevents other markets from being similarly flooded are the exact things that the App store has removed namely, barrier to entry (anybody with $100 and a bunch of time can make an App) and fixed cost upkeep (it costs nothing to maintain an App on the App store). So is there any hope or are we doomed to some continuing spiral of 99 cent shovel ware that eventually consumes all of the quality on the App store and dooms it as a marketplace. Well I think there is hope, but it comes outside of standard economic models. Tune in next time as I start to get into that hope by taking a look at consumers.
* One could argue that there is a cost of at least $99/year for the developer's license and additional ongoing upkeep should one continually update their App, but these costs are so low that we can consider them for all intents and purposes as free.
** Obviously demand and supply can never be truly infinite. There is a finite amount of bits in the world and not everyone is going to want every free App. The point is more that supply and demand lose meaning when there's no cost to supply and no price to pay for a good demanded. For this reason free Apps stretch the capabilities of the standard supply and demand model. There are things outside of price that give nominally free Apps a price such as advertising, but for the purposes of modeling the App store, I've chosen to ignore that consideration.
*** By middling quality, I don't necessarily mean bad, I mean projects that aren't as good as they possibly could be. If your a developer who has a viable 99 cent game that you could add additional polish to for some price why would you if you're still going to charge 99 cents for it? There are plenty of reasons to add polish, but there are plenty of reasons not to hence both ways being viable options.
If you were to round up a bunch of economists and ask them what the most important principle in economics is, they would unanimously shout the law of supply and demand. The law of supply and demand simply put is that when supply goes up, price goes down, and when demand goes up, price goes up. In an ideal market, the price of a good is placed where these two lines meet and everything is great. The App store (digital distribution in general) is the first thing I can think of that necessitates an update to the supply and demand model. Why? Because digital distribution effectively gives us infinite supply. Once a product is on the market it costs $0 to maintain that product on the market.* Think of it this way, if someone out there had discovered a way to grow just one carrot and then could infinitely duplicate that carrot for free, how much would you be willing to spend on carrots?
If we forget about demand for a second and ask ourselves what goes into the price of a good, there are many factors. One of those factors is scarcity. Lobsters cost more in Kansas than in Maine because there's just not that many lobsters in Kansas. With infinite supply there is no scarcity in the App store. Another is production cost, as there is no production cost for an individual download of an app, this also is not a consideration in price.* There is the initial cost of development to consider, but if/when that is recouped you're again left with no real supply-side rationale for price.
Now let's look at demand. There are a ton of free apps on the App store. The demand for anything that's free should be infinite.** So we have a lot of apps that have infinite supply and infinite demand, why would anyone ever bother with actually paying for an app. Well in most markets that have huge supply and huge demand, price can often act as a signal for quality (quality is of course subjective as the following example will show). Think of bottled water. In many parts of the US, you have three options for water. You can schlep down to the local waterway with your cup, you can pour a glass from your tap for a nominal fee, or you can spend $1.50 on 16oz. of bottled water. Between the first two options, you'd be hard up to find anyone drinking from the lake, but between the last two you have a more interesting choice. Many people who choose bottled water over tap water do so because of a perception that the bottled water is of higher quality than the tap (another major factor would be a perception of convenience with bottled water). Is the water of higher quality? Well maybe it is and maybe it isn't, most consumers aren't going to break out the lab kit in order to test it. They instead rely on the price to signal that it is of higher quality. Markets have worked like this ever since there have been markets, with price signaling something about a product.
But does price signal anything of note in the App store? At first blush it may seem to indicate quality, but I would argue that quality games with higher prices are able to charge more because of brand recognition rather than price signaling. Cave can charge $12 for Deathsmiles because they're Cave, not because $12 is a particularly meaningful price indicating quality. If you download the next game that is released at $0.99, it's pretty likely it won't be as good as a number of free games available. Now as a consumer, once price loses its ability to signal quality, what are you left with? Well you have brand recognition, and you have word of mouth. In part two I'm going to talk a little bit about word of mouth as I focus more on the consumer. For now let's look at brand recognition in the App store as we continue to focus on supply.
Squeenix is about as powerful a brand name as you can get in gaming. They can and do ask for premium prices on many of their games. Now Squeenix makes quality games as well so you're not really taking a chance when you purchase something from them. You know what kind of game you're going to get and if you're a fan it's usually going to be worth the price. So let's compare some prices: Crystal Defenders: $8 & Field Runners: $3; Final Fantasy: $9 & Ash $5. I bring these examples up because they're two games in the same genres of, in my opinion, similar quality, and the non-Squeenix games are from lesser known developers. Is the price difference here indicating quality, or is it a premium paid for brand recognition? I would argue that it is a premium. If it is a premium then what do the price points of Field Runners and Ash indicate versus 99 cent offerings in their respective genres? The answer is nothing. To the average consumer on the App store, price does not convey any meaningful information, and since this is the case the average consumer is far less likely to "risk" spending a premium amount on a game that ostensibly has cheaper alternatives. In the case of FR and Ash, both games were good enough to have some consumers eventually understand the value of their price, but the price itself did not indicate that value.
So as an unknown developer you really only have three options when it comes to pricing. You make a middling quality*** game and sell it for 99 cents and hope that it competes with the slew of other Apps of middling quality that sell for 99 cents. This is viable especially if your game has a distinguishing hook. You make a high quality game and sell it for 99 cents with the hope that its high quality will increase your brand recognition so that subsequent games can be released for a higher price. This is viable and arguably the best strategy if you plan on long term success for a new development studio, this is also why a lot of games go on sale when a new game comes out from a company. The third option is to make a high quality game and sell it at a premium price, and hope that word of mouth regarding its quality can carry it. This is somewhat viable, but definitely the riskiest choice of all. It also requires that there is a large enough audience for your game that you'll be able to reach without getting lost in the clutter of the App store. I'll talk about that more in the next part as well.
If we assume an even split between these three options we have a reason for why there are such a deluge of 99 cent games, and such a disparity in quality. In actuality, I would guess that the first option is far and away the most popular, and this undermines price as a signal even further by flooding the market with middling quality games that cost a buck. The funny thing is that what prevents other markets from being similarly flooded are the exact things that the App store has removed namely, barrier to entry (anybody with $100 and a bunch of time can make an App) and fixed cost upkeep (it costs nothing to maintain an App on the App store). So is there any hope or are we doomed to some continuing spiral of 99 cent shovel ware that eventually consumes all of the quality on the App store and dooms it as a marketplace. Well I think there is hope, but it comes outside of standard economic models. Tune in next time as I start to get into that hope by taking a look at consumers.
* One could argue that there is a cost of at least $99/year for the developer's license and additional ongoing upkeep should one continually update their App, but these costs are so low that we can consider them for all intents and purposes as free.
** Obviously demand and supply can never be truly infinite. There is a finite amount of bits in the world and not everyone is going to want every free App. The point is more that supply and demand lose meaning when there's no cost to supply and no price to pay for a good demanded. For this reason free Apps stretch the capabilities of the standard supply and demand model. There are things outside of price that give nominally free Apps a price such as advertising, but for the purposes of modeling the App store, I've chosen to ignore that consideration.
*** By middling quality, I don't necessarily mean bad, I mean projects that aren't as good as they possibly could be. If your a developer who has a viable 99 cent game that you could add additional polish to for some price why would you if you're still going to charge 99 cents for it? There are plenty of reasons to add polish, but there are plenty of reasons not to hence both ways being viable options.
Tuesday, July 26, 2011
Lots of work being done
Wow, the past couple of days have been super busy. The game is coming along nicely, and I feel pretty good about getting to an alpha phase around the end of August. We have some new art that looks really sweet, and the story is coming along nicely. I updated the balance of the battle system a little bit and that seems to be working out well. I like where we are in the development phase because it's all coming together pretty quickly after working super hard and not having much to actually show for it. Today I added two cut scenes, a new map, a character, introduced the runes, three new enemies, and two new map animations that help with moving around. Not bad for one day of programming.
I really hope to start sharing some more artwork and info about the game. I don't want to give away too much of the mechanics until we're closer to release, but seeing some sweet art always helps get everyone excited. I will say that all of the mechanics are designed with the iPhone in mind. The controls are all specific to the device, and I think they're really intuitive. Hopefully others will find that to be the case as well.
Anyways, I'm kind of on a roll so I'm going to head back to coding. I don't think anyone's really reading just yet, but I'm gonna keep posting just in case.
I really hope to start sharing some more artwork and info about the game. I don't want to give away too much of the mechanics until we're closer to release, but seeing some sweet art always helps get everyone excited. I will say that all of the mechanics are designed with the iPhone in mind. The controls are all specific to the device, and I think they're really intuitive. Hopefully others will find that to be the case as well.
Anyways, I'm kind of on a roll so I'm going to head back to coding. I don't think anyone's really reading just yet, but I'm gonna keep posting just in case.
Tuesday, July 19, 2011
The Engine
The engine for the game is pretty much complete. It still needs polish here and there, but I'm feeling pretty good about it. The AI is particularly awesome, but a whole lot of other things are streamlined to make building the game easy. That's the nice thing about building an engine from scratch versus using something already out there, you get to make it do exactly what you want it to do as you build it.
The engine is based on the engine built in Learning iOS Game Programming by Michael Daley. If you're at all interested in game development, but aren't too familiar with iOS and Objective C, I highly recommend this book and his site http://www.71squared.com/, which has some great tutorials.
The number one thing for me with the engine, as it affects the player, is that it be really fast. I've tried my best to keep everything really simple and small. This should lead to a minimum of waiting for the player. So far in everything that I've done, I've noticed no load time for anything and a drop in frame rate only once or twice. Both times, it was easy to make a quick tweak to improve performance. Hopefully this will continue all through development to lead to no noticeable loading for the player.
Now it's time to start putting everything together. It seems sort of like what directing a movie is like. Characters move with stage directions, and dialogue has to flow. There're fades in and out and special effects. It's really exciting. Building the engine was exciting too, but for as awesome as I think it is, there's really not a whole lot to actually see. Now that we're building the story, the work is more visible. To use an analogy, the engine was a lot like making drywall from scratch, most people would just buy it and never try and learn how its made or how it works. But now that it's done, I can start using it to build a house.
The engine is based on the engine built in Learning iOS Game Programming by Michael Daley. If you're at all interested in game development, but aren't too familiar with iOS and Objective C, I highly recommend this book and his site http://www.71squared.com/, which has some great tutorials.
The number one thing for me with the engine, as it affects the player, is that it be really fast. I've tried my best to keep everything really simple and small. This should lead to a minimum of waiting for the player. So far in everything that I've done, I've noticed no load time for anything and a drop in frame rate only once or twice. Both times, it was easy to make a quick tweak to improve performance. Hopefully this will continue all through development to lead to no noticeable loading for the player.
Now it's time to start putting everything together. It seems sort of like what directing a movie is like. Characters move with stage directions, and dialogue has to flow. There're fades in and out and special effects. It's really exciting. Building the engine was exciting too, but for as awesome as I think it is, there's really not a whole lot to actually see. Now that we're building the story, the work is more visible. To use an analogy, the engine was a lot like making drywall from scratch, most people would just buy it and never try and learn how its made or how it works. But now that it's done, I can start using it to build a house.
Wednesday, July 13, 2011
AI!
As a programmer, the things I get most excited about are usually the things that are the least visible to the player. That said, the AI system is up and running and I think it's really awesome! The framework of the code lets me add AI combinations for specific enemies with just a small array of integers. This lets the decision-making happen really fast, and makes it really fast to add different logics to an enemy. The visibility of the system to the player shouldn't be anything other than having enemies behave the way that players have come to expect (hopefully a little smarter than in some other games). For me, getting this done this quickly is a small triumph.
Under the hood the system works similar to other AI systems I'm sure. It first assesses the current state of the decider, then it uses preset conditions that need to be passed to decide what to do. All of the different conditions currently allow for over 800,000 different combinations to ensure that enemies are always doing something smart. Adding a combination to an enemy takes a single line of code and adding a new condition would only take about ten lines of code. All in all I think it's a really positive start to creating a deep and robust battle experience.
Under the hood the system works similar to other AI systems I'm sure. It first assesses the current state of the decider, then it uses preset conditions that need to be passed to decide what to do. All of the different conditions currently allow for over 800,000 different combinations to ensure that enemies are always doing something smart. Adding a combination to an enemy takes a single line of code and adding a new condition would only take about ten lines of code. All in all I think it's a really positive start to creating a deep and robust battle experience.
Tuesday, July 12, 2011
Skillz!
Phew! Just finished up with the majority of the player skills. There will be over 200 once everything is done. Next up is going to be working on the AI for enemies you face in battle. I want to set up a ProLog style infrastructure. This would do three things: 1) It would allow all enemies to draw from a single set of rules. This would help improve performance by limiting the amount of objects every enemy needs. 2) The single set would allow for easy creation of new enemies. 3) I think it'd be really cool.
I've gone over to Touch Arcade and asked for people's input on what they would like to see from enemies in an RPG. What I would like to do is take people's suggestions, interpret them into prolog-esque rules and then build the enemy AI to interpret those rules. Hopefully this will make the battles feel much more dynamic than the repetitive attack spams that a lot of party-based RPGs are (still love 'em though).
As I continue to build the battle system and reading people's thoughts on random encounters and grinding, I become more and more convinced that the way to go will be to have fewer battles that are longer and more engaging. To be honest, I'm not sure why more games haven't gone this route. Having longer and more engaging battles just ups the importance of good AI.
After reading tons of forums andplaying researching as many iPhone RPGs as possible, I think one of our main goals has to be to eliminate grinding from the balance to TEoR as much as possible. I'm not sure how simple that will be, but I think having good AI is a good place to start, since then you're not dependent on a player's party simply being able to survive an attack every five seconds.
I look to have more on the AI and battle in general towards the end of the week.
-Lazer
I've gone over to Touch Arcade and asked for people's input on what they would like to see from enemies in an RPG. What I would like to do is take people's suggestions, interpret them into prolog-esque rules and then build the enemy AI to interpret those rules. Hopefully this will make the battles feel much more dynamic than the repetitive attack spams that a lot of party-based RPGs are (still love 'em though).
As I continue to build the battle system and reading people's thoughts on random encounters and grinding, I become more and more convinced that the way to go will be to have fewer battles that are longer and more engaging. To be honest, I'm not sure why more games haven't gone this route. Having longer and more engaging battles just ups the importance of good AI.
After reading tons of forums and
I look to have more on the AI and battle in general towards the end of the week.
-Lazer
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